Long-Term rates rise this week reflecting future expectations

This week, Freddie Mac’s Primary Mortgage Market Survey showed that the 30-year fixed-rate mortgage (FRM) averaged 6.12% (with an average of 0.5 points) for the week ending January 26, 2006. This average is UP from last week; which was at 6.10% but still lower from two weeks ago, which was at 6.15%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.75% for the week ending January 26, 2006 (with an average of 0.6 points). This average remained unchanged from last week.

One-year Treasury-indexed ARMs averaged 5.20% this week (with an average of 0.6 points). This average is UP from last week when the average was at 5.18% and even higher from two weeks ago when it was at 5.15%.

Frank Nothaft, Freddie Mac vice president and chief economist, explained “The miniscule rise in mortgage rates this week most likely reflects market expectations that the Federal Reserve will once again raise rates next week,” “At the beginning of last week, financial markets priced in a 90% probability that the Fed would increase short-term rates. Today, the odds are statistically certain.”

“Keep in mind, however, long-term rates are still below December’s monthly average and continue to fuel the housing market”

With all this said, I think that if you are looking to purchase a home now, you should really be trying to qualify for a fixed-rate loan. If this is not an option for you, I strongly encourage you to look into the Hybrid ARMs. You should consider these types of ARMs with a long fixed rate period if that fits your future profile of living in this home. If you are thinking about refinancing, I suggest you do it now and get out of the Interest-only loan or Option ARM loan, which could become even more dangerous as the time passes by. Always keep in mind what your future plans are and you economic situation as well as the cost and consequences any of this transaction may bring.

January 27th, 2006 · Filed Under Keeping an Eye on the Market

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Mortgage watch 1/26/2006

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January 26th, 2006 · Filed Under Keeping an Eye on the Market

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Long Term Mortgage rates fall for the 6th straight week!!

Freddie Mac’s Primary Mortgage Market Survey showed that the 30-year fixed-rate mortgage (FRM) averaged 6.10% (with an average of 0.5 points) for the week ending January 19, 2006. This average was down from last week; which was at 6.15%. This is the lowest it has been since the week ending October 20, 2005 when it also averaged 6.10%.

The average for the 15-year fixed-rate mortgage is at 5.67% for this week; which is down from last week’s average of 5.71%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.75% for the week ending January 19, 2006 (with an average of 0.6 points). This average was slightly down from last week; which was at 5.76%

One-year Treasury-indexed ARMs averaged 5.18% this week (with an average of 0.6 points). This average is UP from last week when the average was at 5.15%.

Frank Nothaft, Freddie Mac vice president and chief economist, explained “Over the last six weeks, long-term mortgage rates have dropped nearly a quarter of a percent in the face of little or no inflationary pressure,” “Our outlook for the housing industry continues to be that mortgage rates will remain affordable for the rest of the year at least, keeping the industry alive and well into the foreseeable future.”

January 20th, 2006 · Filed Under Keeping an Eye on the Market

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Mortgage watch 1/19/6

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January 19th, 2006 · Filed Under Keeping an Eye on the Market

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Looking for a loan? Here are 10 things you should know

The home buying process is often complicated. Here are 10 points you should take into consideration when looking for a loan to finance your home purchase.

1.- Do your homework. Become familiar with some of the jargon loan officers and real estate agents use. Become familiar with the home loan process by asking your loan officer. If your loan officer does not want to or cant answer clearly your questions and explain both the benefits and the disadvantages each loan available to you, look for another agent.

2.- Know your credit rating. If you obtain it through your loan officer, get a copy of it and have them explain it you and show you how to increase your score.

3.- If you decide your loan officer does not have all the answers to your questions, shop around with the copy of your credit report.

4.- Understand that a good loan officer is there to help you get approved for the loan but never at the cost of overextending your finances just to purchase or keep a piece of real estate. You might regret it later.

5.- Make sure the loan officer is licensed. If you are unsure confirm it with the California Department of Real Estate.

6.- Don’t sign anything you are unclear about.

7.- When planning for your future mortgage monthly payments, make sure you’ve taken into account taxes and insurance with an impound account. Otherwise, make sure to save enough each month for the semi-annual and annual payments of each.

8.- If you feel pressured by your agent to sign a contract, take a step back to review it and think it over.

9.- If you are told “I wont charge you points” or “I wont charge you closing costs” beware, these costs could be hidden on the interest rate you are paying.

10.- If you are unsure make sure you review your mortgage plan and terms even if your agent has confirmed it with you verbally numerous times. Many times buyers accept mortgage loans that contain long pre-payment penalties they never agreed to or terms unclear to them. This occurs at times when the buyer gets overwhelmed with all the paperwork that needs to be signed.

January 17th, 2006 · Filed Under Mortgage - Loan Information

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Mortgage watch 1/12/2006

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January 12th, 2006 · Filed Under Keeping an Eye on the Market

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30-year rates dip BUT 1-year ARM’s go up

Freddie Mac, the mortgage giant, reported last Thursday in its weekly survey that for the week ending January 6th, the rates for a 30-year fixed mortgage had lowered to 6.21%, a change from the average the week before 6.22%. This has been the lowest since October.
On the other hand, 1-year adjustable rate mortgages (ARMs) went up to 5.16% for the week ending January 6th from 5.15% the week before.

January 9th, 2006 · Filed Under Keeping an Eye on the Market

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ARMs keep getting riskier as time passes by

The Federal Reserve has raised short-term rates therefore reducing the savings on interest-payments when comparing adjustable-rate mortgages to fixed-rate mortgages.

The Federal Reserve raised short-term interest rates at each of their meetings during last year (2005). First-year rates on 1-year ARMs rose a full percentage point over the year while 30-year fixed-rate loans were only up about one-half of a percentage point.

These actions and the future outlook on interest rates as well as the housing market will put many homeowners in trouble when their fixed rate term on their ARM and interest-only ARM period ends. The monthly payment is likely to jump by 20%, 30% or even 40%.

The good news: You can still get a good deal refinancing to a 15, 30 or 40 year fixed-rate mortgage, thanks to the bond market, which has defied the Federal Reserve and kept long terms rates at a steadier pace than short-term rates.

If you are among the millions (I am one of them) who took out an adjustable-rate mortgage in the past few years, now it’s time to either get a 15, 30, 40 year fixed-rate mortgage or a Hybrid ARM with a longer fixed-rate term (5-7-10 years). Figure how much you can save per month by refinancing. If you’d have the new loan long enough for that saving to offset the refinancing costs, do it. Remember the Federal Reserve probably is not finished raising short-term rates so your ARM could end up being a lot higher than it is now. If you refinance then to a fixed-rate loan, these rates could be higher as well.

The people that are at most risk than the people with soon to end hybrid ARM or interest-only ARM are those people that were enticed to take out an negative amortization ARM loan, most commonly known as “Option ARM” where they make minimum payments of 1% or less. The rise on short-term interest rates and most importantly the housing market direction could really leave them with out a home.

Another way, for people with ARM loans, to tackle this problem is by making a big principal payment, reducing the size of the loan. This will cut the monthly payments when the loan adjusts. ARMs are figured by applying the new interest rate when it adjusts to the remaining loan balance and term.

Homeowners often overlook this possibility because we are more familiar with fixed-rate loans. In a fixed-rate loan if you make a big principal payment, your monthly payments do not get reduced, it will however help you pay-off the loan faster.

Of these two options I mentioned, refinancing or making a big principal payment, refinancing is probably better because it means locking in a relatively low fixed rate. If you pay down the principal, you will reduce your monthly payments but you would still face the risk of higher payments if interest rates continue going up.

January 5th, 2006 · Filed Under Mortgage - Loan Information

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